Bain Capital is closing in on its next big target struggling with too much debt – the country’s second-largest hospital operator Healthscope.
The Boston-based private equity firm that has been behind the recapitalisation of some of Australia’s largest companies is believed to be in talks with lenders – along with some other private equity groups – about buying Healthscope’s debt at a discounted price, should it come up on offer.
Bain Capital has already bought Virgin Australia during the global pandemic after it collapsed with too much debt as part of recapitalisation play, and Accolade Wines from The Carlyle Group after it, too, found itself with unsustainable loan costs amid weak conditions in the wine industry.
Healthscope has remained in the headlines as its owner, Brookfield, manages its $1.6bn-odd debt repayment costs at a time that it faces challenges with rising expenses and staff shortages, particularly in the area of mental health.
The hospital operator has about 25 financiers, including Australia’s top four banks, Challenger and lenders out of Asia.
Loan agreements prevent them from selling debt in the market at a discount, but should Healthscope breach debt covenants in March, as expected, it provides them with an out legally to divest their loans at a discount.
Sources say some of Bain Capital’s peers have also been in talks about buying debt, and there may be a path for groups to pick up the loans before the end of March.
Already, landlords are preparing for Healthscope to enter voluntary administration, holding talks with its rivals such as St John of God Health Care to determine if they would take over leases if Healthscope could no longer pay rent.
Brookfield has also been lobbying the government and health insurers to gain additional financial support for the business it bought in 2019 for $4.4bn after a bidding war with BGH Capital.
Brookfield is understood to take the view that there is no longer any equity left in Healthscope, which is not in default and is not yet believed to have breached any covenants.
Over recent years, Bain Capital has consistently turned up at the negotiating table with its private equity peers to gain an opportunity to buy large Australian companies that have faltered due to large debt levels.
It hit headlines in Australia amid the pandemic when it purchased Virgin Australia in 2020, injecting $700m of equity and taking on $5.15bn of debt, and it now has plans to list the airline in 2025, pocketing a $1bn-plus windfall if the deal goes well.
In 2023, it moved on to Accolade Wines, leading a lending consortium that took control of the business from rival Carlyle, which purchased the group with a large debt pile in 2018 for $1bn.
It has since merged the stable that includes commercial brands such as Hardys and Grant Burge with Pernod Ricard’s Australia, New Zealand and Spain businesses.
Bain Capital has $US180bn ($287bn) of assets under management.
Its operating units are Private Equity, Growth and Venture, Capital Solutions, Credit and Capital Markets and Real Assets.
Bain Capital’s private equity unit is also in talks to buy the Australian listed wealth manager, Insignia Financial, for $3bn.
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